Circular Head Community Financial Services Ltd · 2019. 11. 4. · Rotary Club of Smithton. Councillor ‐ Municipal Council. Qualifications, experience and expertise: Harry is a

Smithton & Districts Community Bank Branch

Circular Head Community Financial Services LtdABN 21 626 751 157

2019 Annual Report

Circular Head Community Financial Services Ltd Annual Report 1

Chairman’s report 2

Manager’s report 3

Bendigo and Adelaide Bank report 4

Directors’ report 5

Auditor’s independence declaration 10

Financial statements 11

Notes to the financial statements 15

Directors’ declaration 37

Independent audit report 38

Contents

2 Annual Report Circular Head Community Financial Services Ltd

For year ending 30 June 2019

It was with great relief and satisfaction to attend the opening of the Smithton & Districts Community Bank Branch on

19 June 2019. The opening was well supported by shareholders and representatives of our co-partner Bendigo and

Adelaide Bank Limited. The presence of the Bank’s Managing Director, Marnie Baker and senior staff was an excellent

indication of the belief and support the Bank has in our community enterprise.

The Bank’s foundation is its shareholders, the true believers of the community spirit that for now and generations to

come will support Circular Head in much more than banking services. This banking service will grow as years go by with

the Community Bank branch becoming a vital part of our community.

We are fortunate in retaining the services of Donna James as our Business Development Manager and initially with

Barbara Joyce and now Caliee Barber as Customer Relationship Officer and Kathy Monson’s team in operating the

Agency. A big thank you for their efforts and dedication as you are the beating heart of our Community Bank branch.

The early indications are that the Community Bank branch is well supported with encouraging business activity

and interest. We are achieving our early targets.

The shareholders have an active and dedicated Board of Directors who regularly meet to review all aspects of the

Community Bank branch. They are a group of volunteers donating their time and expertise in something they strongly

believe in and for the benefit of the Circular Head community.

I thank each one of them for their efforts and contributions and I know they stand proud of their belief in the success

of the Community Bank branch.

I thank Stuart Nankervis and Martyn Neville for their support and assistance. Their balanced guidance and advice are

truly appreciated.

We have only just begun and I assure you the Board of Directors and staff will dedicate their time and effort to ensure

the Community Bank branch will be a success and achieve the model of a Community Bank branch in supporting

Circular Head.

Thomas Patrick Glynn

Chairman

Chairman’s report


For year ending 30 June 2019

Circular Head, put a needle in the soil, you’ll pull out a crowbar...

In my opinion, this descriptive statement illustrates the potential of the picture-perfect region I now call home.

April 2019, I arrived in Tasmania relocating from Central Queensland. The skills and passion I have for my profession

and community align with the strong values and goals of the Circular Head Financial Services Ltd group otherwise

known as Smithton & Districts Community Bank Branch. Essentially these are the reasons why I chose to work for this

Community Bank branch. Since arriving, professionally and personally I feel I have settled in quickly. This is due to the

ongoing support of the Board, my work colleagues, along with numerous people being hospitable and welcoming to me.

Our strategy is to focus on the success of our customers, people, partners and communities. The community has

already shown tremendous support prior to and since our launch date of 19 June 2019. The growth of the business

since the opening is a key indicator that our community continues to support the Bank. Our greatest point of difference

is, “Your banking business creates income for your Community Bank branch, allowing us to return those profits back to

the Circular Head Region.”

The range of financial services we provide ensures we can meet our customers needs, placing a high value on existing

and potential customer relationships. Circular Head region has a vast cross section of consumers and industry types.

Across these segments, retail banking, business banking and rural banking, my colleagues and I ensure the region is

supported by a high level of skill and experience. Thank you to Scott, Mark, James and Dean for your ongoing support.

Staff who have also contributed to the initial success of the bank are Barbara Joyce, to whom we thank for her

contribution. Callie Barber will soon join us as our new Customer Relationship Officer to continue the high level of

customer service we pride ourselves on. Callie is an active member of Rural Youth, AgFest along with building her skill

set by further studies in Agricultural Business Management. We also thank Kathy Monson and the Agency team who

continue to provide exceptional customer experiences.

Lastly, thank you to the Board of Directors. Led by Chair Tom Glynn, your incredible sense of community spirit and

generosity in terms of sharing your professional skills, selflessness in numerous hours of volunteering continue to

motivate the Community Bank branch to deliver the best possible outcomes.

We look forward to the next twelve months and as always, we will continue to work hard to ensure the Community Bank

branch is able to support the people who actively support it.

Donna James

Business Development Manager

Manager’s report


Bendigo and Adelaide Bank reportFor year ending 30 June 2019

As a Bank of 160-plus years, we’re proud to hold the mantle of Australia’s fifth biggest bank. In today’s banking

environment it’s time to take full advantage of this opportunity and for even more people to experience banking with

Bendigo Bank and our way of banking, and with our Community Bank partners.

In promoting our point of difference it’s sometimes lost that although we’re different, we’re represented in more than

500 communities across Australia and offer a full suite of banking and financial products and services. In many ways

we’re also a leader in digital technology and meeting the needs of our growing online customer base, many of whom

may never set foot in a traditional bank branch.

At the centre of our point of difference is the business model you chose to support as a shareholder that supports

local communities. Whether you’re a shareholder of our most recent Community Bank branch which opened in

Smithton, Tasmania, in June 2019, or you’re a long-time shareholder who, from more than 20 years ago, you all play an

important role. Your support has enabled your branch, and this banking model, to prosper and grow. You’re one of more

than 75,000 Community Bank company shareholders across Australia who are the reason today, we’re Australia’s only

bank truly committed to the communities it operates in.

And for that, we thank you. For the trust you’ve not only put in Bendigo and Adelaide Bank, but the faith you’ve put in

your community and your Community Bank company local Board of Directors.

Bendigo and Adelaide Bank continues to rank at the top of industry and banking and finance sector awards. We have

awards for our customer service, we have award winning products and we have a customer base that of 1.7 million-plus

that not only trusts us with their money, but which respects our ‘difference’.

As a Bank, we’re working hard to ensure that those who are not banking with us, and not banking with your

Community Bank branch, make the change. It really is a unique model and we see you, the shareholder, as playing a

key role in helping us grow your local Community Bank business. All it takes is a referral to your local Branch Manager.

They’ll do the rest.

We find that our customer base is a very loyal group. It’s getting people to make the change that’s the challenge.

In today’s environment, we’ve never had a better chance to convince people to make the change and your support in

achieving this is critical.

From Bendigo and Adelaide Bank, once again, thank you for your ongoing support of your Community Bank branch and

your community.

We would also like to thank and acknowledge the amazing work of your branch staff and Directors in developing your

business and supporting the communities that you live and work in.

Mark Cunneen

Head of Community Support

Bendigo and Adelaide Bank


For the financial year ended 30 June 2019

TEXT HERE......

Directors’ report

Directors

Thomas Patrick GlynnChairmanOccupation: Lawyer

Special responsibilities: NilInterest in shares: 501

Jan Elizabeth BishopVice ChairOccupation: Semi‐retired

Special responsibilities: NilInterest in shares: 26,001

Gerard Frederick BlizzardDirectorOccupation: Bookkeeper

Special responsibilities: Human Resources CommitteeInterest in shares: 1,001

Hendrik KorpershoekDirectorOccupation: Farmer


Robert James NicholsonDirectorOccupation: Business owner

Special responsibilities: NilInterest in shares: 1

Qualifications, experience and expertise: Tom is a partner of a legal practice operating in Tasmania and New South Wales, practising as a commercial lawyer since 1980. He has held the positions of director and chairman of various organisations, including sporting and school associations. Tom was the Chair of the Community Bank Project Steering Committee and is committed to the establishment of a community bank in the Smithton area.

Qualifications, experience and expertise: Jan has extensive experience in business, having operated a general store, a timber harvesting and haulage business and a cattle farm. She is actively involved in local community groups, including the Circular Head Improvement Programme Committee and Women in Timber. For the past 20 years, Jan has worked on the Irishtown Community Centre Ladies & General Committees and is a member of Soroptimists International. She has served as Deputy Mayor of the Circular Head Council from 2014 to 2018. Jan served on the Community Bank Steering Committee.

Qualifications, experience and expertise: Bookkeeping. Worked for Roberts Ltd 31 years, 25 years as Rural Finance Manager. Rotary Club of Smithton. Councillor ‐ Municipal Council.

Qualifications, experience and expertise: Harry is a second generation farmer running a mixed farming enterprise including dairy and cropping. He has always been involved in local community groups and organisations and, for several years, has served on the committees of the Forest Sports Centre and the McCain growers committee. Harry was a member of the Community Bank Steering Committee.

Qualifications, experience and expertise: Robert is an IT specialist, owning two businesses with state‐wide customers, including large not‐for profit organisations in the Smithton area. He is active in the local church and broader community, is a senior leader with the Stanley Boys Rally and Chair of Riverbend Youth Centre Inc.

Circular Head Community Financial Services LtdDirectors' Report

Your directors submit the financial statements of the company for the financial year ended 30 June 2019.

The names and details of the company's directors who held office during or since the end of the financial year:

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Directors’ report (continued)Circular Head Community Financial Services LtdDirectors' Report

Directors (continued)

Norman Eric RichardsonDirectorOccupation: Farmer


Elisabeth Margaret RyanDirectorOccupation: Finance Administrator


Julian John JacobsDirector (Appointed 15 May 2019)Occupation: Company Director


Matthew John GunninghamDirector (Appointed 15 May 2019)Occupation: Dairy Farmer


Jennifer Rosalie WallisSecretary (Appointed 15 May 2019)Occupation: Retiree

Special responsibilities: Low Volume Market ChampionInterest in shares: 1,000

Qualifications, experience and expertise: Elisabeth moved to Tasmania from Sydney 30 years ago. She initially worked for a local accounting firm and later owned the Stanley Post Office. Elisabeth now works in finance administration. She sees her experience as invaluable to her role as a Board member. Elisabeth is an active member in the community and served on the Community Bank Project Steering Committee.

Qualifications, experience and expertise: Clerk in accountancy firm 16 years. Client Services Officer 20 years. Bookkeeper 30 plus years. Treasurer twice for Rotary Club of Smithton. Past President Rotary Club of Smithton.

Qualifications, experience and expertise: 40 years self‐employed. Hospitality Industry. Director Tasmanian Hospitality Association. Past Director Tourism Industry Council Tasmania. Past Chair Independent Tourism Operators Tasmania. Member Lions Club, member Stanley Golf Club.

Qualifications, experience and expertise: Farms in partnership with wide in Circular Head and managers a number of dairy farms in the district. Completed a Nuffield Scholarship in 2017/18, also a Rabobank Executive Development Programme and a Murray Goulburn Supplier Development Programme.

Qualifications, experience and expertise: Norm owned and ran businesses in Melbourne and Hobart before moving to Smithton and now farms locally. He has a diploma in governance and is a trainer, delivering training in Aboriginal Cultural Awareness and is also a drug and alcohol counsellor. Norm is a board member of Rural Health Tasmania and Reconciliation Tasmania and served on the Community Bank Steering Committee. He is very passionate about developing stronger community spirit.

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Directors’ report (continued)

Year ended Year ended30 June 2019 30 June 2018

$ $

(67,200) ‐

Dividends

Significant changes in the state of affairs

During the period the company has signed the franchise agreement with Bendigo & Adelaide Bank Limited and commenced trading under the aforementioned agreement.

In the opinion of the directors there were no other significant changes in the state of affairs of the company that occurred during the financial year under review not otherwise disclosed in this report or the financial statements.

No dividends were declared or paid for the previous year and the directors recommend that no dividend be paid for the current year.

Circular Head Community Financial Services LtdDirectors' Report

Directors (continued)

Julie Skye Ann BernhagenSecretary (Resigned 15 May 2019)Occupation: Executive Officer Strategy and PerformanceQualifications, experience and expertise: Julie has broad experience in strategic project work, corporate governance and risk and business continuity and has worked at the Circular Head Council as Executive Officer Strategy & Performance for the past 5 years. She also raises Murray Grey cattle and is interested in sustainable agriculture. Julie has a strong connection with Rotary, having held the position of president and secretary and chaired several committees. She is also committed to working with emergency services and community organisations and chairs the Western Fire Management Area Committee. Julie has been treasurer of Circular Head Children’s Services for the past 6 years and was the secretary of the Company.Special responsibilities: NilInterest in shares: 1,501

Directors were in office for this entire year unless otherwise stated.

Company Secretary

The company secretary is Jennifer Rosalie Wallis. Jennifer was appointed to the position of secretary on 15 May 2019 following the resignation of Julie Skye Ann Bernhagen on the same day.

Jennifer's experience includes clerk in accountancy firm 16 years. Client Services Officer 20 years. Bookkeeper 30 plus years. Treasurer twice for Rotary Club of Smithton. Past President Rotary Club of Smithton.

Principal Activities

The principal activities of the company during the financial year were working towards signing a franchise agreement to operate a Community Bank branch of Bendigo and Adelaide Bank Limited. The company signed the franchise agreement in January 2019 and began facilitating Community Bank services under management rights to operate a franchised branch of Bendigo and Adelaide Bank Limited in June 2019.

A Prospectus dated 20 September 2018 was lodged with the Australian Securities and Investments Commission (ASIC). The company issued 607,000 shares at an issue price of $1.00 per ordinary share.

There have been no other significant changes in the nature of these activities during the year.

Operating results

Operations have continued to perform in line with expectations. The loss of the company for the financial year after provision for income tax was:

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Directors’ report (continued)Circular Head Community Financial Services LtdDirectors' Report

Events since the end of the financial year

Likely developments

The company will continue its policy of facilitating banking services to the community.

Environmental regulation

The company is not subject to any significant environmental regulation.

Directors' benefits

Indemnification and insurance of directors and officers

Directors' meetings

Eligible Attended

Thomas Patrick Glynn 21 20Jan Elizabeth Bishop 21 14Gerard Frederick Blizzard 21 19Hendrik Korpershoek 21 12Robert James Nicholson 21 18Norman Eric Richardson 21 16Elisabeth Margaret Ryan 21 18Julian John Jacobs (Appointed 15 May 2019) 3 2Matthew John Gunningham (Appointed 15 May 2019) 3 2Jennifer Rosalie Wallis (Appointed 15 May 2019) 3 3Julie Skye Ann Bernhagen (Resigned 15 May 2019) 19 14

Proceedings on behalf of the company

There are no matters or circumstances that have arisen since the end of the financial year that have significantly affected or may significantly affect the operations of the company the results of those operations or the state of affairs of the company, in future years.

Disclosure of the nature of the liability and the amount of the premium is prohibited by the confidentiality clause of the contract of insurance. The company has not provided any insurance for an auditor of the company or a related body corporate.

The number of directors' meetings attended by each of the directors of the company during the year were:

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the company for all or part of those proceedings.

No director has received or become entitled to receive, during or since the financial year, a benefit because of a contract made by the company, controlled entity or related body corporate with a director, a firm which a director is a member or an entity in which a director has a substantial financial interest.

Board Meetings Attended

No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001.

The company has indemnified all directors and the manager in respect of liabilities to other persons (other than the company or related body corporate) that may arise from their position as directors or manager of the company except where the liability arises out of conduct involving the lack of good faith.

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Directors’ report (continued)Circular Head Community Financial Services LtdDirectors' ReportNon audit services

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Thomas Patrick Glynn, Chairman

none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision‐making capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards.

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out o page 6.

Signed in accordance with a resolution of the board of directors at Smithton, Tasmania on 20 September 2019.

The company may decide to employ the auditor on assignments additional to their statutory duties where the auditor's expertise and experience with the company are important. Details of the amounts paid or payable to the auditor (Andrew Frewin Stewart) for audit and non audit services provided during the year are set out in the notes to the accounts.

The board of directors has considered the position and is satisfied that the provision of the non‐audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

all non‐audit services have been reviewed by the board to ensure they do not impact on the impartiality and objectivity of the auditor

The directors are satisfied that the provision of non‐audit services by the auditor, as set out in the notes did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

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10.


Lead auditor’s independence declaration under section 307C of the Corporations Act 2001 to the directors of Circular Head Community Financial Services Ltd As lead auditor for the audit of Circular Head Community Financial Services Ltd for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been: i) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation

to the audit; and ii) no contraventions of any applicable code of professional conduct in relation to the audit.

Andrew Frewin Stewart Joshua Griffin 61 Bull Street, Bendigo Vic 3550 Lead Auditor Dated: 20th September 2019

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Auditor’s independence declaration


Financial statements

2019 2018Notes $ $

Revenue from ordinary activities 4 6,705 ‐

Employee benefits expense (50,713) ‐

Charitable donations, sponsorship, advertising and promotion (5,985) ‐

Occupancy and associated costs (5,166) ‐

Systems costs (1,332) ‐

Depreciation and amortisation expense 5 (11,440) ‐

Finance costs 5 (213) ‐

General administration expenses (18,708) ‐

Loss before income tax credit (86,852) ‐

Income tax credit 6 19,652 ‐

Loss after income tax credit (67,200) ‐

Total comprehensive income for the year attributable to the ordinary shareholders of the company:

(67,200) ‐

Earnings per share ¢ ¢

Basic loss per share 22 (72.15) ‐

for the year ended 30 June 2019

Circular Head Community Financial Services LtdStatement of Profit or Loss and Other Comprehensive Income

The accompanying notes form part of these financial statements

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The accompanying notes form part of these financial statements.


Financial statements (continued)

2019 2018Notes $ $

ASSETS

Current assets

Cash and cash equivalents 7 327,042 8 Trade and other receivables 8 7,193 ‐

Total current assets 334,235 8

Non‐current assets

Property, plant and equipment 9 75,413 ‐ Intangible assets 10 100,597 ‐ Deferred tax asset 11 31,207 ‐

Total non‐current assets 207,217 ‐

Total assets 541,452 8

LIABILITIES

Current liabilities

Trade and other payables 12 15,147 ‐ Loans to related entities 13 14,848 ‐ Provisions 14 2,112 ‐

Total current liabilities 32,107 ‐

Total liabilities 32,107 ‐

Net assets 509,345 8

EQUITY

Issued capital 15 576,545 8 Accumulated losses 16 (67,200) ‐

Total equity 509,345 8

Circular Head Community Financial Services Ltd

as at 30 June 2019Balance Sheet


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Issued Totalcapital equity

Notes $ $ $

Balance at 1 July 2017 ‐ ‐ ‐

Total comprehensive income for the year ‐ ‐ ‐

Transactions with owners in their capacity as owners:

Shares issued during period 15 8 ‐ 8

Costs of issuing shares 15 ‐ ‐ ‐

Dividends provided for or paid ‐ ‐ ‐

Balance at 30 June 2018 8 ‐ 8

Balance at 1 July 2018 8 ‐ 8

Total comprehensive income for the year ‐ (67,200) (67,200)

Transactions with owners in their capacity as owners:

Shares issued during period 15 607,000 ‐ 607,000

Costs of issuing shares 15 (30,463) ‐ (30,463)

Dividends provided for or paid ‐ ‐ ‐

Balance at 30 June 2019 576,545 (67,200) 509,345


Circular Head Community Financial Services LtdStatement of Changes in Equity

Accumulated losses


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2019 2018Notes $ $

Cash flows from operating activities

Receipts from customers 27,720 ‐ Payments to suppliers and employees (92,853) ‐ Interest paid (213) ‐

Net cash used in operating activities 17 (65,346) ‐

Cash flows from investing activities

Payments for property, plant and equipment (77,450) ‐ Payments for intangible assets (110,000) ‐

Net cash used in investing activities (187,450) ‐

Cash flows from financing activities

Proceeds from share issue 15 607,000 8 Payment of share issue costs 15 (42,018) ‐ Loans from associates 13 24,848 ‐ Asssociate loans converted to ordinary equity 13 (10,000) ‐

Net cash provided by financing activities 579,830 8

Net increase in cash held 327,034 8

Cash and cash equivalents at the beginning of the financial year 8 ‐

Cash and cash equivalents at the end of the financial year 7(a) 327,042 8

Circular Head Community Financial Services LtdStatement of Cash Flowsfor the year ended 30 June 2019


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2019 2018Notes $ $

Cash flows from operating activities

Receipts from customers 27,720 ‐ Payments to suppliers and employees (92,853) ‐ Interest paid (213) ‐

Net cash used in operating activities 17 (65,346) ‐

Cash flows from investing activities

Payments for property, plant and equipment (77,450) ‐ Payments for intangible assets (110,000) ‐

Net cash used in investing activities (187,450) ‐

Cash flows from financing activities

Proceeds from share issue 15 607,000 8 Payment of share issue costs 15 (42,018) ‐ Loans from associates 13 24,848 ‐ Asssociate loans converted to ordinary equity 13 (10,000) ‐

Net cash provided by financing activities 579,830 8

Net increase in cash held 327,034 8

Cash and cash equivalents at the beginning of the financial year 8 ‐

Cash and cash equivalents at the end of the financial year 7(a) 327,042 8

Circular Head Community Financial Services LtdStatement of Cash Flowsfor the year ended 30 June 2019


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For year ended 30 June 2019

TEXT HERE.....

Notes to the financial statements

AASB 9 Financial Instruments

AASB 15 Revenue from Contracts with Customers

AASB 15 replaces AASB 111 Construction Contracts , AASB 118 Revenue and related Interpretations and it applies, with limited exceptions, to all revenue arising from contracts with customers. AASB 15 establishes a five‐step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

AASB 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.

The existing revenue recognition through the monthly Bendigo and Adelaide Bank Limited profit share provides an accurate reflection of consideration received in exchange for the transfer of services to the customer. Therefore based on our assessment this accounting standard has not materially affected any of the amounts recognised in the current period and is not likely to affect future periods.

AASB 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non‐financial items. This standard replaces AASB 139 Financial Instruments: Recognition and Measurement .

Based on our assessment this accounting standard has not had any impact on the carrying amounts of financial assets or liabilities at 1 July 2018. For additional information about accounting policies relating to financial instruments, see Note 1 k).

Note 1.

Application of new and amended accounting standards

These financial statements and notes comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The financial statements have been prepared under the historical cost convention on an accruals basis as modified by the revaluation of financial assets and liabilities at fair value through profit or loss and where stated, current valuations of non‐current assets. Cost is based on the fair values of the consideration given in exchange for assets.

a) Basis of preparation

Compliance with IFRS

Circular Head Community Financial Services LtdNotes to the Financial Statementsfor the year ended 30 June 2019

Summary of significant accounting policies

Comparative figures

Where required by Australian Accounting Standards comparative figures have been adjusted to conform with changes in presentation for the current financial year.

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The company is a for‐profit entity for the purpose of preparing the financial statements.

Historical cost convention

Critical accounting estimates

The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. These areas involving a higher degree of judgement or complexities, or areas where assumptions and estimates which are significant to the financial statements are disclosed in note 3.

There are two new accounting standards which have been issued by the AASB that became mandatorily effective for accounting periods beginning on or after 1 January 2018, and are therefore relevant for the current financial year.

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Notes to the financial statements (continued)Circular Head Community Financial Services LtdNotes to the Financial Statementsfor the year ended 30 June 2019

Summary of significant accounting policies (continued)Note 1.

a) Basis of preparation (continued)

AASB 9 Financial Instruments (continued)

There are also a number of accounting standards and interpretations issued by the AASB that become effective in future accounting periods.

The company has elected not to apply any accounting standards or interpretations before their mandatory operative date for the annual reporting period beginning 1 July 2018. These future accounting standards and interpretations therefore have no impact on amounts recognised in the current period or any prior period.

AASB 16 Leases

Only AASB 16, effective for the annual reporting period beginning on or after 1 January 2019 is likely to impact the company. AASB 16 introduces a single, on‐balance sheet lease accounting model for lessees. A lessee recognises a right‐of‐use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short‐term leases and leases of low‐value items. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases.

AASB 16 replaces existing leases guidance, including AASB 117 Leases and related Interpretations. This standard is mandatory for annual reporting periods beginning on or after 1 January 2019.

The company plans to apply AASB 16 initially on 1 July 2019, using the modified retrospective approach. Therefore, the cumulative effect of adopting AASB 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 July 2019, with no restatement of comparative information.

The company has assessed the estimated impact that initial application of AASB 16 will have on its financial statements. The actual impacts of adopting the standard on 1 July 2019 may change.

The company will recognise new assets and liabilities for operating leases of its branch. The nature of expenses related to these leases will now change as the company will recognise a depreciation charge for right‐of‐use assets and interest expense on lease liabilities. Previously, the company recognised operating lease expense on a straight‐line basis over the term of the lease.

No significant impact is expected for the company’s finance leases.

Based on the information currently available, the company estimates that it will recognise additional lease liabilities and new right‐of‐use assets of $80,000.

Economic dependency ‐ Bendigo and Adelaide Bank Limited

The company has entered into a franchise agreement with Bendigo and Adelaide Bank Limited that governs the management of the Community Bank branch at Smithton, Tasmania.

The branch operate as a franchise of Bendigo and Adelaide Bank Limited, using the name “Bendigo Bank” and the logo and system of operations of Bendigo and Adelaide Bank Limited. The company manages the Community Bank branch on behalf of Bendigo and Adelaide Bank Limited, however all transactions with customers conducted through the Community Bank branch are effectively conducted between the customers and Bendigo and Adelaide Bank Limited.

All deposits are made with Bendigo and Adelaide Bank Limited, and all personal and investment products are products of Bendigo and Adelaide Bank Limited, with the company facilitating the provision of those products. All loans, leases or hire purchase transactions, issues of new credit or debit cards, temporary or bridging finance and any other transaction that involves creating a new debt, or increasing or changing the terms of an existing debt owed to Bendigo and Adelaide Bank Limited, must be approved by Bendigo and Adelaide Bank Limited. All credit transactions are made with Bendigo and Adelaide Bank Limited, and all credit products are products of Bendigo and Adelaide Bank Limited.

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Summary of significant accounting policies (continued)

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Core banking products

The following is a summary of the material accounting policies adopted by the company in the preparation of the financial statements. The accounting policies have been consistently applied, unless otherwise stated.

Revenue arises from the rendering of services through its franchise agreement with the Bendigo and Adelaide Bank Limited. The revenue recognised is measured by reference to the fair value of consideration received or receivable, excluding sales taxes, rebates, and trade discounts.

Interest and fee revenue is recognised when earned. The gain or loss on disposal of property, plant and equipment is recognised on a net basis and is classified as income rather than revenue. All revenue is stated net of the amount of Goods and Services Tax (GST).

Note 1.

The revenue earned by the company is dependent on the business that it generates. It may also be affected by other factors, such as economic and local conditions, for example, interest rates.

Bendigo and Adelaide Bank Limited has identified some Bendigo Bank Group products and services as 'core banking products'. It may change the products and services which are identified as core banking products by giving the company at least 30 days notice. Core banking products currently include Bendigo Bank branded home loans, term deposits and at call deposits.

design, layout and fit out of the Community Bank branch

training for the branch manager and other employees in banking, management systems and interface protocol

methods and procedures for the sale of products and provision of services

security and cash logistic controls

calculation of company revenue and payment of many operating and administrative expenses

the formulation and implementation of advertising and promotional programs

sales techniques and proper customer relations.

Revenue calculation

b) Revenue

The franchise agreement provides that three forms of revenue may be earned by the company – margin, commission and fee income. Bendigo and Adelaide Bank Limited decides the form of revenue the company earns on different types of products and services.

a) Basis of preparation (continued)

Economic dependency ‐ Bendigo and Adelaide Bank Limited (continued)

The company promotes and sells the products and services, but is not a party to the transaction.

The credit risk (i.e. the risk that a customer will not make repayments) is for the relevant Bendigo and Adelaide Bank Limited entity to bear as long as the company has complied with the appropriate procedures and relevant obligations and has not exercised a discretion in granting or extending credit.

Bendigo and Adelaide Bank Limited provides significant assistance in establishing and maintaining the Community Bank branch franchise operations. It also continues to provide ongoing management and operational support and other assistance and guidance in relation to all aspects of the franchise operation, including advice in relation to:

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● minus any costs of funds i.e. interest applied by Bendigo and Adelaide Bank Limited to fund a loan.

Discretionary financial contributions

The change may be to the method of calculation of margin, the amount of margin, commission and fee income or a change of a margin to a commission or vice versa. This may affect the amount of revenue the company receives on a particular product or service. The effect of the change on the revenue earned by the company is entirely dependent on the change.

Bendigo and Adelaide Bank Limited must give the company 30 days notice before it changes the products and services on which margin, commission or fee income is paid, the method of calculation of margin and the amount of margin, commission or fee income.

Commission

b) Revenue (continued)

The amount has been based on the volume of business attributed to a branch. The purpose of the discretionary payments is to assist with local market development activities, including community sponsorships and donations. It is for the board to decide how to use the MDF.

Margin is arrived at through the following calculation:

In addition to margin, commission and fee income, and separate from the franchise agreement, Bendigo and Adelaide Bank Limited has also made discretionary financial payments to the company. These are referred to by Bendigo and Adelaide Bank Limited as a “Market Development Fund” (MDF).

Commission is a fee paid for products and services sold. It may be paid on the initial sale or on an ongoing basis. Commission is payable on the sale of an insurance product such as home contents. Examples of products and services on which ongoing commissions are paid include leasing and Sandhurst Trustees Limited products.

Fee income is a share of what is commonly referred to as 'bank fees and charges' charged to customers by Bendigo Bank Group entities including fees for loan applications and account transactions.

Interest paid by customers on loans less interest paid to customers on deposits

The company is entitled to a share of the margin earned by Bendigo and Adelaide Bank Limited (i.e. income adjusted for Bendigo and Adelaide Bank Limited’s interest expense and interest income return). However, if this reflects a loss, the company incurs a share of that loss.

Fee income

Ability to change financial return

Under the franchise agreement, Bendigo and Adelaide Bank Limited may change the form and amount of financial return that the company receives. The reasons it may make a change include changes in industry or economic conditions or changes in the way Bendigo and Adelaide Bank Limited earns revenue.

plus any deposit returns i.e. interest return applied by Bendigo and Adelaide Bank Limited for a deposit,

Margin

Margin is paid on all core banking products. A funds transfer pricing model is used for the method of calculation of the cost of funds, deposit return and margin.

Note 1.

The payments from Bendigo and Adelaide Bank Limited are discretionary and Bendigo and Adelaide Bank Limited may change the amount or stop making them at any time.

If Bendigo and Adelaide Bank Limited makes a change to the margin or commission on core banking products and services, it must not reduce the margin and commission the company receives on core banking products and services Bendigo and Adelaide Bank Limited attributes to the company to less than 50% (on an aggregate basis) of Bendigo and Adelaide Bank Limited’s margin at that time. For other products and services, there is no restriction on the change Bendigo and Adelaide Bank Limited may make.

14



Note 1. Summary of significant accounting policies (continued)

b) Revenue (continued)

Monitoring and changing financial return

Bendigo and Adelaide Bank Limited monitors the distribution of financial return between Community Bank companies and Bendigo and Adelaide Bank Limited on an ongoing basis.

Overall, Bendigo and Adelaide Bank Limited has made it clear that the Community Bank model is based on the principle of shared reward for shared effort. In particular, in relation to core banking products and services, the aim is to achieve an equal share of Bendigo and Adelaide Bank Limited's margin.

c) Income tax

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or unrefundable).

Deferred tax

Deferred tax is accounted for using the balance sheet liability method on temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill or gain from a bargain purchase.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities reflects the tax consequences that would follow from the manner in which the entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax and when the balances relate to taxes levied by the same taxation authority and the entity intends to settle its tax assets and liabilities on a net basis.

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the Statement of Profit or Loss and Other Comprehensive Income, except when it relates to items credited or debited to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or gain from a bargain purchase.

d) Employee entitlements

Provision is made for the company's liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on‐costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

The company contributes to a defined contribution plan. Contributions to employee superannuation funds are charged against income as incurred.

15



5 ‐ 15 years3 ‐ 5 years

The following estimated useful lives are used in the calculation of depreciation:

i) Payment terms

h) Intangibles

e) Cash and cash equivalents

Receivables are carried at their amounts due. The collectability of debts is assessed at balance date and specific provision is made for any doubtful accounts. Liabilities for trade creditors and other amounts are carried at cost that is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the company.

‐ motor vehicles

Receivables and payables are non interest bearing and generally have payment terms of between 30 and 90 days.

Plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.


j) Borrowings

g) Property, plant and equipment

Note 1.

For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Balance Sheet.

All loans are initially measured at the principal amount. Interest is recognised as an expense as it accrues.

Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated at the rate equivalent to the available building allowance using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period.

The renewal processing fee paid to Bendigo and Adelaide Bank Limited when renewing the franchise agreement has also been recorded at cost and is amortised on a straight line basis over the life of the franchise agreement.

‐ leasehold improvements

f) Trade receivables and payables

The franchise fee paid to Bendigo and Adelaide Bank Limited has been recorded at cost and is amortised on a straight line basis over the life of the franchise agreement.

16



(i)

(ii)

Financial assets are subsequently measured at:

‐ amortised cost;‐ fair value through other comprehensive income (FVOCI); or‐ fair value through profit and loss (FVTPL).

A financial asset is subsequently measured at amortised cost if it meets the following conditions:

‐ the financial asset is managed solely to collect contractual cash flows; and‐

A financial asset is subsequently measured at FVOCI if it meets the following conditions:

‐

‐

Financial liabilities include borrowings, trade and other payables and non‐derivative financial liabilities (excluding financial guarantees). They are subsequently measured at amortised cost using the effective interest rate method.

The effective interest rate is the internal rate of return of the financial asset or liability, that is, it is the rate that exactly discounts the estimated future cash flows through the expected life of the instrument to the net carrying amount at initial recognition.

Financial assets

the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principle amount outstanding on specified dates.

The company's trade and most other receivables are measured at amortised cost as well as deposits that were previously classified as held‐to‐maturity under AASB 139.

the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principle amount outstanding on specified dates; and

The company's investments in equity instruments are measured at FVTPL unless the company irrevocably elects at inception to measure at FVOCI.

Classification and subsequent measurement

Recognition and initial measurement

Financial instruments, incorporating financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument.

Financial instruments (except for trade receivables) are initially measured at fair value plus transaction costs, except where the instrument is classified at fair value through profit or loss, in which case transaction costs are expensed to profit or loss immediately. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.

k) Financial instruments


Trade receivables are initially measured at the transaction price if the trade receivables do not contain a significant financing component or if the practical expedient was applied as specified in AASB 15.63.

Financial liabilities

the business model for managing the financial assets comprises both contractual cash flows collection and the selling of the financial asset.

By default, all other financial assets that do not meet the conditions of amortised cost and FVOCI's measurement condition are subsequently measured at FVTPL.

17



(i)

(ii)

The company recognises a loss allowance for expected credit losses on:

‐ financial assets that are measured at fair value through other comprehensive income;‐ lease receivables;‐ loan commitments that are not measured at fair value through profit or loss; and‐ financial guarantee contracts that are not measured at fair value through profit or loss.

Loss allowance is not recognised for:

‐ financial assets measured at fair value through profit of loss; or‐ equity instruments measured at fair value through other comprehensive income.

‐

‐ lease receivables.

k) Financial instruments (continued)


Recognition of expected credit losses in financial statements

At each reporting date, the entity recognises the movement in the loss allowance as an impairment gain or loss in the statement of profit or loss and other comprehensive income.

Assets measured at fair value through other comprehensive income are recognised at fair value with changes in fair value recognised in other comprehensive income. The amount in relation to change in credit risk is transferred from other comprehensive income to profit or loss at every reporting period.

On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

Impairment

Expected credit losses are the probability‐weighted estimate of credit losses over the expected life of a financial instrument. A credit loss is the difference between all contractual cash flows that are due and all cash flows expected to be received, all discounted at the original effective interest rate of the financial instrument.

The company uses the simplified approach to impairment, as applicable under AASB 9. The simplified approach does not require tracking of changes in credit risk at every reporting period, but instead requires the recognition of lifetime expected credit loss at all times.

This approach is applicable to:

trade receivables that result from transactions that are within the scope of AASB 15, that contain a significant financing component; and

In measuring the expected credit loss, a provision matrix for trade receivables is used, taking into consideration various data to get to an expected credit loss, (ie diversity of its customer base, appropriate groupings of its historical loss experience etc.).

Derecognition

Derecognition of financial liabilities

A liability is derecognised when it is extinguished (ie when the obligation in the contract is discharged, cancelled or expires). An exchange of an existing financial liability for a new one with substantially modified terms, or a substantial modification to the terms of a financial liability, is treated as an extinguishment of the existing liability and recognition of a new financial liability.

The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non‐cash assets transferred or liabilities assumed, is recognised in profit or loss.

Derecognition of financial assets

A financial asset is derecognised when the holder's contractual rights to its cash flows expires, or the asset is transferred in such a way that all the risks and rewards of ownership are substantially transferred.

18



Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership are transferred to the company are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Ordinary shares are recognised at the fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions of other past events, it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation.

A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly recommended on or before the reporting date.

o) Earnings per share

The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Balance Sheet. Cash flows are included in the Statement of Cash Flows on a gross basis.

n) Issued capital

Leased assets are depreciated on a straight‐line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight‐line basis over the life of the lease term.

l) Leases

Note 1.

p) Goods and Services Tax

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

m) Provisions


19



Long‐TermBBB+A‐A3

A‐2

The company has performed a historical assessment of receivables from Bendigo and Adelaide Bank Limited and found no instances of default. As a result no impairment loss allowance has been made in relation to the Bendigo & Adelaide Bank Limited receivable as at 30 June 2019.

Expected credit loss assessment for other customers

The company has performed a historical assessment of the revenue collected from other customers and found no instances of default. As a result no impairment loss allowance has been made in relation to other customers as at 30 June 2019.

Fitch Ratings F2

The company's franchise agreement limits the company's credit exposure to one financial institution, being Bendigo and Adelaide Bank Limited. Due to the reliance on Bendigo and Adelaide Bank Limited the company has reviewed the credit ratings provided by Standard & Poors, Moody's and Fitch Ratings to determine the level of credit risk exposure of the company. The most recent credit rating provided by the ratings agencies is as follows:

(i) Market risk

Based on the above risk ratings the company has classified Bendigo and Adelaide Bank Limited as low risk.

Stable

Ratings Agency Short‐Term OutlookStandard & Poor's Stable

The company has no significant concentrations of credit risk. It has policies in place to ensure that customers have an appropriate credit history.

Expected credit loss assessment for Bendigo and Adelaide Bank Limited

(v) Cash flow and fair value interest rate risk

(ii) Price risk

The company has no exposure to any transactions denominated in a currency other than Australian dollars.

Note 2.

Risk management is carried out directly by the board of directors.

Financial risk management

Prudent liquidity management implies maintaining sufficient cash and marketable securities and the availability of funding from credit facilities. The company believes that its sound relationship with Bendigo and Adelaide Bank Limited mitigates this risk significantly.

StableMoody's P‐2

Interest‐bearing assets are held with Bendigo and Adelaide Bank Limited and subject to movements in market interest. Interest‐rate risk could also arise from long‐term borrowings. Borrowings issued at variable rates expose the company to cash flow interest‐rate risk. The company believes that its sound relationship with Bendigo and Adelaide Bank Limited mitigates this risk significantly.

The company is not exposed to equity securities price risk as it does not hold investments for sale or at fair value. The company is not exposed to commodity price risk.

(iv) Liquidity risk

(iii) Credit risk

The company's activities expose it to a limited variety of financial risks: market risk (including currency risk, fair value interest risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the entity. The entity does not use derivative instruments.

20



(vi) Capital management

(a)

(b)

There were no changes in the company's approach to capital management during the year.

Note 2. Financial risk management (continued)

Expected credit loss assessment for other customers (continued)

subject to the availability of distributable profits, the relevant rate of return multiplied by the average level of share capital of the franchisee over that 12 month period where the relevant rate of return is equal to the weighted average interest rate on 90 day bank bills over that 12 month period plus 5%.

Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

In accordance with the franchise agreement, in any 12 month period, the funds distributed to shareholders shall not exceed the distribution limit.

Note 3.

Taxation

Judgement is required in assessing whether deferred tax assets and certain tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from carried‐forward tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits.

Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. These depend on estimates of future sales volumes, operating costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation.

20% of the profit or funds of the franchisee otherwise available for distribution to shareholders in that 12 month period; and

The board's policy is to maintain a strong capital base so as to sustain future development of the company. The board of directors monitor the return on capital and the level of dividends to shareholders. Capital is represented by total equity as recorded in the Balance Sheet.

The distribution limit is the greater of:

Critical accounting estimates and judgements

The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.

The board is managing the growth of the business in line with this requirement. There are no other externally imposed capital requirements, although the nature of the company is such that amounts will be paid in the form of charitable donations and sponsorship. Charitable donations and sponsorship paid for the year ended 30 June 2019 can be seen in the Statement of Profit or Loss and Other Comprehensive Income.

Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.

21



2019 2018$ $

Operating activities:‐ gross margin 2,553 ‐ ‐ services commissions 284 ‐ ‐ fee income 391 ‐ ‐ market development fund 3,333 ‐

Total revenue from operating activities 6,561 ‐

Non‐operating activities:‐ interest income 144 ‐

Total revenue from non‐operating activities 144 ‐

Total revenues from ordinary activities 6,705 ‐

Estimation of useful lives of assets

Note 3. Critical accounting estimates and judgements (continued)

Taxation (continued)

These judgements and assumptions are subject to risk and uncertainty. There is therefore a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amount of recognised deferred tax assets and liabilities may require adjustment, resulting in corresponding credit or charge to the Statement of Profit or Loss and Other Comprehensive Income.

At each reporting date, the company reviews the carrying amounts of its tangible and intangible assets that have an indefinite useful life to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the entity estimates the recoverable amount of the cash‐generating unit to which the asset belongs.

Note 4. Revenue from ordinary activities

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‐tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

Impairment of assets

The estimation of the useful lives of assets has been based on historical experience and the condition of the asset is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary.

If the recoverable amount of an asset (or cash‐generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash‐generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash‐generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash‐generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

22



2019 2018$ $

Depreciation of non‐current assets:‐ leasehold improvements 1,321 ‐ ‐ motor vehicle 716 ‐

Amortisation of non‐current assets:‐ franchise agreement 855 ‐ ‐ establishment fee 8,548 ‐

11,440 ‐

Finance costs: ‐ Finance costs 213 ‐

The components of tax credit comprise:‐ Future income tax benefit attributable to losses (21,772) ‐ ‐ Movement in deferred tax (9,435) ‐ ‐ Net tax benefit from equity raising costs recognised through deferred tax 11,555 ‐

(19,652) ‐

Operating loss (86,852) ‐

Prima facie tax on loss from ordinary activities at 27.5% (23,884) ‐

Add tax effect of:‐ non‐deductible expenses 4,233 ‐ ‐ timing difference expenses 190 ‐ ‐ other deductible expenses (2,311) ‐

(21,772) ‐

Movement in deferred tax (9,435) ‐ Net tax benefit from equity raising costs recognised through deferred tax 11,555 ‐

(19,652) ‐

Cash at bank and on hand 327,042 8

ExpensesNote 5.

Income tax credit

Cash and cash equivalentsNote 7.

The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax credit as follows:

Note 6.

23



Note 7.(a) Reconciliation to cash flow statement 2019 2018$ $

Cash at bank and on hand 327,042 8

Prepayments 7,193 ‐

Leasehold improvementsAt cost 45,455 ‐ Less accumulated depreciation (1,321) ‐

44,134 ‐

Motor vehiclesAt cost 31,995 ‐ Less accumulated depreciation (716) ‐

31,279 ‐

Total written down amount 75,413 ‐

Movements in carrying amounts:

Leasehold improvementsCarrying amount at beginning ‐ ‐ Additions 45,455 ‐ Disposals ‐ ‐ Less: depreciation expense (1,321) ‐

Carrying amount at end 44,134 ‐

Motor vehiclesCarrying amount at beginning ‐ ‐ Additions 31,995 ‐ Disposals ‐ ‐ Less: depreciation expense (716) ‐

Carrying amount at end 31,279 ‐


Trade and other receivablesNote 8.

Note 9. Property, plant and equipment

The above figures reconcile to the amount of cash shown in the statement of cash flows at the end of the financial year as follows:

24



2019 2018$ $

Establishment feeAt cost 100,000 ‐ Less: accumulated amortisation (8,548) ‐

91,452 ‐

Franchise feeAt cost 10,000 ‐ Less: accumulated amortisation (855) ‐

9,145 ‐


Non‐current:

Deferred tax assets‐ accruals 798 ‐ ‐ employee provisions 581 ‐ ‐ equity raising costs 9,244 ‐ ‐ tax losses carried forward 21,772 ‐

32,395 ‐ Deferred tax liability‐ property, plant and equipment 1,188 ‐

1,188 ‐

Net deferred tax asset 31,207 ‐

(31,207) ‐

Current:

Trade creditors 2,023 ‐ Other creditors and accruals 13,124 ‐

15,147 ‐

Note 10. Intangible assets

TaxNote 11.

Trade and other payablesNote 12.

Movement in deferred tax charged to Statement of Profit or Loss and Other Comprehensive Income

25



2019 2018$ $

Current:

At the beginning of the reporting period ‐ ‐ Directors loans 24,848 ‐ Loans converted to ordinary equity in the company (10,000) ‐

14,848 ‐

Provision for annual leave 2,112 ‐

607,008 ordinary shares fully paid (2018: 8) 607,008 8 Less: equity raising expenses (30,463) ‐

576,545 8

Movement in issued capital 2019 2018Number Number

Fully paid ordinary shares:At the beginning of the reporting period 8 ‐ Shares issued pursuant to capital raised under the Prospectus 597,000 8 Loans from associates converted to ordinary equity 10,000 ‐

607,008 8

The company has incurred pre‐establishment costs. These costs have in part been paid by the Steering Committee and other entities. The costs paid for on behalf of the company by other entities is recognised as loans from related entities. As part of the share capital issue, $10,000 of related party loan debt was converted to 10,000 ordinary shares. The conversion was consistent with the prospectus share application of $1 per ordinary share.

Current:

A Prospectus dated 20 September 2018 was lodged with the Australian Securities and Investments Commission (ASIC). The company issued 607,000 shares at an issue price of $1.00 per ordinary share.

Note 13. Loans from related entities

Note 15. Issued capital

ProvisionsNote 14.

26



Issued capital (continued)

(a)

(b)

(c)

●●

●

Prohibited shareholding interest

Note 15.

In summary, a person has a prohibited shareholding interest if any of the following applies:

A person must not have a prohibited shareholding interest in the company.

They control or own 10% or more of the shares in the company (the "10% limit").

Where a person has a prohibited shareholding interest, the voting and dividend rights attaching to the shares in which the person (and his or her associates) have a prohibited shareholding interest, are suspended.

Rights attached to shares

Voting rights

Subject to some limited exceptions, each member has the right to vote at a general meeting.

On a show of hands or a poll, each member attending the meeting (whether they are attending the meeting in person or by attorney, corporate representative or proxy) has one vote, regardless of the number of shares held. However, where a person attends a meeting in person and is entitled to vote in more than one capacity (for example, the person is a member and has also been appointed as proxy for another member) that person may only exercise one vote on a show of hands. On a poll, that person may exercise one vote as a member and one vote for each other member that person represents as duly appointed attorney, corporate representative or proxy.

The purpose of giving each member only one vote, regardless of the number of shares held, is to reflect the nature of the company as a community based company, by providing that all members of the community who have contributed to the establishment and ongoing operation of the Community Bank branch have the same ability to influence the operation of the company.

Dividends

Generally, dividends are payable to members in proportion to the amount of the share capital paid up on the shares held by them, subject to any special rights and restrictions for the time being attaching to shares. The franchise agreement with Bendigo and Adelaide Bank Limited contains a limit on the level of profits or funds that may be distributed to shareholders. There is also a restriction on the payment of dividends to certain shareholders if they have a prohibited shareholding interest (see below).

Transfer

Generally, ordinary shares are freely transferable. However, the directors have a discretion to refuse to register a transfer of shares.

Subject to the foregoing, shareholders may transfer shares by a proper transfer effected in accordance with the company’s constitution and the Corporations Act 2001.

Where the person is a shareholder, after the transfer of shares in the company to that person the number of shareholders in the company is (or would be) lower than the base number (the "base number test"). The base number is 106. As at the date of this report, the company had 125 shareholders.

As with voting rights, the purpose of this prohibited shareholding provision is to reflect the community‐based nature of the company.

In the opinion of the board they do not have a close connection to the community or communities in which the company predominantly carries on business (the "close connection test").

27



Issued capital (continued)

2019 2018$ $

Balance at the beginning of the financial year ‐ ‐ Net loss from ordinary activities after income tax (67,200) ‐

Balance at the end of the financial year (67,200) ‐

Loss from ordinary activities after income tax (67,200) ‐

Non cash items:

‐ depreciation 2,037 ‐ ‐ amortisation 9,403 ‐

Changes in assets and liabilities:

‐ (increase)/decrease in receivables (7,193) ‐ ‐ (increase)/decrease in other assets (19,652) ‐ ‐ increase/(decrease) in payables 15,147 ‐ ‐ increase/(decrease) in provisions 2,112 ‐

Net cash flows used in operating activities (65,346) ‐

Note 15.

Prohibited shareholding interest (continued)

Note 17. Statement of cash flows

The board has the power to request information from a person who has (or is suspected by the board of having) a legal or beneficial interest in any shares in the company or any voting power in the company, for the purpose of determining whether a person has a prohibited shareholding interest. If the board becomes aware that a member has a prohibited shareholding interest, it must serve a notice requiring the member (or the member's associate) to dispose of the number of shares the board considers necessary to remedy the breach. If a person fails to comply with such a notice within a specified period (that must be between three and six months), the board is authorised to sell the specified shares on behalf of that person. The holder will be entitled to the consideration from the sale of the shares, less any expenses incurred by the board in selling or otherwise dealing with those shares.

Accumulated lossesNote 16.

Reconciliation of loss from ordinary activities after tax to net cash provided used in operating activities

In the constitution, members acknowledge and recognise that the exercise of the powers given to the board may cause considerable disadvantage to individual members, but that such a result may be necessary to enforce the prohibition.

28



2019 2018$ $

Operating lease commitmentsNon‐cancellable operating leases contracted for but not capitalised in the financial statementsPayable ‐ minimum lease payments:‐ not later than 12 months 12,000 ‐ ‐ between 12 months and 5 years 44,000 ‐ ‐ greater than 5 years ‐ ‐

56,000 ‐

Amounts received or due and receivable by theauditor of the company for:‐ audit and review services 1,800 ‐ ‐ share registry services 289 ‐ ‐ non audit services 4,520 ‐

6,609 ‐

The names of directors who have held office during the financial year are:

Thomas Patrick GlynnJan Elizabeth BishopGerard Frederick BlizzardHendrik KorpershoekRobert James NicholsonNorman Eric RichardsonElisabeth Margaret RyanJulian John Jacobs (Appointed 15 May 2019)Matthew John Gunningham (Appointed 15 May 2019)Jennifer Rosalie Wallis (Appointed 15 May 2019)Julie Skye Ann Bernhagen (Resigned 15 May 2019)

Leases

Director and related party disclosuresNote 20.

Note 19. Auditor's remuneration

Note 18.

No director or related entity has entered into a material contract with the company. No director's fees have been paid as the positions are held on a voluntary basis.

The Smithton branch operating sub‐lease is a non‐cancellable lease with a five year term. Rent is payable monthly in advance. The lease commenced June 2019 and has one further option for a two‐year term available.

29



Director and related party disclosures (continued)

Directors Shareholdings 2019 2018

Thomas Patrick Glynn 501 1 Jan Elizabeth Bishop 26,001 1 Gerard Frederick Blizzard 1,001 1 Hendrik Korpershoek 7,001 1 Robert James Nicholson 1 1 Norman Eric Richardson 2,001 1 Elisabeth Margaret Ryan 2,501 1 Julian John Jacobs (Appointed 15 May 2019) 20,000 ‐ Matthew John Gunningham (Appointed 15 May 2019) 11,000 ‐ Jennifer Rosalie Wallis (Appointed 15 May 2019) 1,000 ‐ Julie Skye Ann Bernhagen (Resigned 15 May 2019) 1,501 1

No director of the company receives remuneration for services as a company director or committee member.

There are no executives within the company whose remuneration is required to be disclosed.

2019 2018$ $

(a)(67,200) ‐

Number Number(b)

93,137 8

Note 20.

Note 21. Key management personnel disclosures

Loss attributable to the ordinary equity holders of the company used in calculating earnings per share

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share

Note 23.

Contingent liabilities and contingent assets

There were no contingent liabilities or contingent assets at the date of this report to affect the financial statements.

There was movement in directors shareholdings during the year.

Note 22. Earnings per share

Events occurring after the reporting date

Note 24.

There have been no events after the end of the financial year that would materially affect the financial statements.

30



Registered Office Principal Place of Business

32b Smith Street 29 Smith StreetSMITHTON TAS 7330 SMITHTON TAS 7330

Segment reporting

Note 26.

The entity is a company limited by shares, incorporated and domiciled in Australia. The registered office and principal place of business is:

Registered office/Principal place of business

The economic entity operates in the service sector where it facilitates Community Bank services in the Smithton district, Tasmania pursuant to a franchise agreement with Bendigo and Adelaide Bank Limited.

Note 25.

31


Notes to the financial statements (continued)

Note 27. Financial instruments

Financial Instrument Composition and Maturity Analysis

2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

$ $ $ $ $ $ $ $ $ $ % %

Financial assets

Cash and cash equivalents 327,042 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 8 0.00 Nil

Financial liabilities

Payables ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2,023 ‐ N/A N/A

Net Fair Values

Credit Risk

Interest Rate Risk

Sensitivity Analysis

2019 2018$ $

Change in profit/(loss)Increase in interest rate by 1% 3,270 ‐Decrease in interest rate by 1% (3,270) ‐

Change in equityIncrease in interest rate by 1% 3,270 ‐Decrease in interest rate by 1% (3,270) ‐

As at 30 June 2019, the effect on profit and equity as a result of changes in interest rate, with all other variables remaining constant would be as follows:

Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from the interest bearing financial assets and liabilities in place subject to variable interest rates, as outlined above.

Financial instrument

The table below reflects the undiscounted contractual settlement terms for all financial instruments, as well as the settlement period for instruments with a fixed period of maturity and interest rate.

Fixed interest rate maturing in

There are no material credit risk exposures to any single debtor or group of debtors under financial instruments entered into by the economic entity.

The net fair values of financial assets and liabilities approximate the carrying values as disclosed in the balance sheet. The company does not have any unrecognised financial instruments at the year end.

The maximum exposure to credit risk at balance date to recognised financial assets is the carrying amount of those assets as disclosed in the balance sheet and notes to the financial statements.

The company has performed sensitivity analysis relating to its exposure to interest rate risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in interest rates.

Circular Head Community Financial Services LtdNotes to the Financial Statements

Weighted averageNon interest bearing1 year or less Over 1 to 5 years Over 5 years

Floating interest


32


Directors’ declaration

(a)

(i)

(ii)

(b)

(c)

Thomas Patrick Glynn, Chairman

Signed on the 20th of September 2019.

Circular Head Community Financial Services LtdDirectors' Declaration

there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

the audited remuneration disclosures set out in the remuneration report section of the directors' report comply with Accounting Standard AASB124 Related Party Disclosures and the Corporations Regulations 2001.

This declaration is made in accordance with a resolution of the board of directors.

In accordance with a resolution of the directors of Circular Head Community Financial Services Ltd, we state that:

the financial statements and notes of the company are in accordance with the Corporations Act 2001 , including:

giving a true and fair view of the company's financial position as at 30 June 2019 and of its performance for the financial year ended on that date; and

complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

In the opinion of the directors:

33


Independent auditor’s report to the members of Circular Head Community Financial Services Ltd Report on the audit of the financial report Our opinion In our opinion, the accompanying financial report of Circular Head Community Financial Services Ltd, is in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the company’s financial position as at 30 June 2019 and of its financial

performance for the year ended; and ii. complying with Australian Accounting Standards. What we have audited Circular Head Community Financial Services Ltd’s (the company) financial report comprises the:

Statement of profit or loss and other comprehensive income Balance sheet Statement of changes in equity Statement of cash flows Notes comprising a summary of significant accounting policies and other explanatory notes The directors' declaration of the company. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We are independent of the company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Other information The company usually prepares an annual report that will include the financial statements, directors’ report and declaration and our independence declaration and audit report (the financial report). The annual report may also include “other information” on the entity’s operations and financial results and financial position as set out in the financial report, typically in a Chairman’s report and Manager’s report, and reports covering governance and shareholder matters.

Independent audit report


The directors are responsible for the other information. The annual report is expected to be made available to us after the date of this auditor's report. Our opinion on the financial report does not cover the other information and accordingly we will not express any form of assurance conclusion thereon. Our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify that a material inconsistency appears to exist when we read the annual report (or become aware that the other information appears to be materially misstated), we will discuss the matter with the directors and where we believe that a material misstatement of the other information exists, we will request management to correct the other information. Directors’ responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that it gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or cease operations, or have no realistic alternative but to do so. Auditor’s responsibility for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatement can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/home.aspx. This description forms part of our auditor’s report.

Andrew Frewin Stewart Joshua Griffin 61 Bull Street, Bendigo, 3550 Lead Auditor Dated: 20th September 2019

Independent audit report (continued)

Smithton & Districts Community Bank Branch29 Smith Street, Smithton TAS 7330

Phone: (03) 6452 2465 Fax: (03) 6452 2564

Franchisee: Circular Head Community Financial Services Ltd 32B Smith Street, Smithton TAS 7330

ABN: 21 626 751 157

www.bendigobank.com.au/smithton

(BNPAR19105) (10/19)

bendigobank.com.au

Documents

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